Is the End of GE Capital Good News for Ecomagination?

GE recently announced that it would sell off most of GE Capital, ending a decades-long experiment with becoming more about money and less about industrial manufacturing (for most of the last 15 years, the capital side of the business contributed nearly half the company’s earnings).

Most of the coverage of the divestment has focused on the rise of financial regulation, which, so say the press, made the money business less profitable. That’s debatable, but it’s a distraction in many ways. I see two angles on GE’s move that tell an important story, and one that’s not being discussed. First, it’s not nostalgia for manufacturing that’s driving GE CEO Jeff Immelt and his team to make this decision to focus (again and still) on making the stuff our economy needs. They must see better opportunity for profit and growth on the physical side of the business. And second, the biggest opportunity lies in a particular kind of industrial product – those that bring about a cleaner economy.

The world is facing enormous threats to our ability to provide a prosperous, thriving life for what will be 9 billion people by 2050. We need dramatic improvements in energy and water efficiency, and massive rollouts of renewable energy and clean transportation technologies. GE has many products that fit this mold, which the company has bundled under its ecomagination brand for 10 years. What if, deep down, the move away from GE capital is really about the increasing potential for ecomagination products?

At times, I’ve been critical about the sometimes-loose definition of what GE “counts” as an ecomagination project (making oil sands production a bit cleaner, really?). But in general, GE’s green infrastructure offerings do help the world reduce impacts, sometimes dramatically. Even more important to the redesign of GE, this portfolio of products has been a growth engine, providing ballast against the serious pain of the financial meltdown of 2008. In the past, the company has said that ecomagination product sales grew at twice the rate of the rest of the business. Today, a spokesperson says they’re growing at four times the rate of the overall industrial business.

They also proudly tell me that cumulative sales of ecomagination products have reached $200 billion, accounting for 30% of industrial revenues in 2014, or more than $30 billion. The green portfolio alone is now equivalent to a company ranked around 100 on the Fortune 500 list — larger than Nike, McDonald’s, or 3M. Once most of GE Capital is gone, ecomagination will clearly be a major driver of the success of the overall business.

GE’s experience is part of a larger story. Humanity needs the kind of hard-core, heavy, physical infrastructure that GE sells, and we badly need clean infrastructure in particular. Consider even the digital world and the rise of big data, which on the surface seems like a way to lighten our collective load on natural resources. Yes, data helps us dematerialize and find efficiencies in all aspects of our economy. But even the cloud has a very real and physical basis. In a 2013 advertisement in The Washington Post, HP claimed that if you measured countries by power consumption in kilowatts, the fifth largest after China, the U.S., Russia, and India would be the cloud. Yes, our business data and cat videos now require more energy to run than Japan or Brazil.

The cloud, it turns out, is pretty heavy.

So just imagine the weight of the related value chains needed to deliver clothes, food, water, toys, cars, and even digital devices to billions of us. What we don’t see behind the scenes in every consumption moment is a long chain of physical impacts and draws on resources. And behind that chain lies companies like GE building turbines and engines.

We humans need real machinery and complex supply chains to build a $75 trillion economy serving 7.4 billion people. But we have to do it new ways now, with clean technologies.

Yes, we need a financial system to help manage all of this, but we truly need the GEs of the world to focus on making our very concrete essentials leaner, smarter, and cleaner. GE’s newly trim company is a victory of making stuff over making markets, and that’s a good thing.